The Coevolution of CSR Reporting and Operational Activities

Research on Corporate Social Responsibility (CSR) reporting largely neglects whether firm‐level reporting behavior evolves from more symbolic, nonaudited reporting to more substantive, audited reporting. We hypothesize that such an evolution in reporting behavior is driven by the legitimacy benefits that come from reporting on an increasing portfolio of CSR activities. Using a large sample of North American companies over the period from 2002 to 2020, we show that once firms adopt unaudited CSR reporting, they are far more likely to later adopt a range of related activities, and that many of those activities also predict the subsequent adoption of audited reporting. This evidence suggests that changes in CSR reporting behavior happen through a coevolution between reporting and operational activities: firms first adopt nonaudited reports, then expand their operational CSR activities, and later leverage these additional investments to maximize legitimacy benefits by having their reports audited.